Centaline Property Agency Ltd v. Cyberspeed Technology Co Ltd

DCCJ5697/2005

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 5697 OF 2007

BETWEEN

Before: Her Honour Judge H C Wong  in Chambers (Open to the public)

Dates of Hearing:  24 August 2007 and 11 October 2007

Date of Delivery of Decision: 11 October 2007

D E C I S I O N

1.The defendant applies for leave to adjourn its application for leave to appeal my judgment of 15 June 2007.  The hearing of leave application was originally fixed to be heard on 24 August 2007.  At that hearing, the defendant applied for an adjournment for the reason that the defendant’s shareholders were proposing a voluntary winding-up of the company and a meeting with the defendant’s creditors would be held shortly.  The application was therefore adjourned to today.

2.At today’s hearing, Mr Koo, counsel for the defendant, applies for a further adjournment of the defendant’s application because a creditor had petitioned to the court to wind-up the defendant on 28 September 2007.

3.Miss Leung, counsel for the plaintiff, opposes the application to adjourn the application for leave to appeal today.  She cited the authority of a decision by Keith JA in the case of Teng Fuh Company Limited v Keen Lloyd (Holdings) Limited, [1999] 4 HKC 683.  Keith JA dismissed the defendant’s application for a stay under section 181 of the Companies Ordinance and granted the plaintiff’s application for security for costs of the appeal against the defendant, the defendant had relied on a creditor’s petition to wind up the company which was filed one day before the plaintiff’s summons for security for costs. 

4.I agree with Mr Koo, the Teng Fuh case is different from the present case because there is no section 181 application here and the defendant is asking for the court’s discretion to adjourn the hearing of the application for leave to appeal pending the outcome of the creditors’ winding-up proceedings.  Mr Koo informs me that it is very likely the defendant would be wound up by the creditor. 

5.The creditor here who petitioned to the court for the defendant’s winding-up is the Hongkong Bank and, from what Miss Leung had informed me, the shareholders’ winding-up proposal was rejected by the creditors at the 31 August and 10 September 2007 meetings, but it is evident, that the shareholders had an intention to wind up the company.  It is up to the court to decide when the petition is heard whether to grant a decree.  However, from the background related, it is quite possible the company would be wound up.

6.Mr Koo informed me that under the circumstances, the decision whether to proceed with the application for leave to appeal should be left to the liquidators and, hence, the application to adjourn.

7.After taking full consideration of the circumstances, I am reminded of Keith JA’s dictum at page 685 B to C of the Teng Fuh case in an application under section 181 of the Companies Ordinance was made by the defendant.  He said, “As a general rule, where a winding-up petition has been presented, no creditor should thereafter gain priority over creditors of the company in the same class unless the circumstances are very exceptional”, referring to Attlee Investments Ltd v Lee Chuen [1983] 1 HKC 186.  I am aware of section 184(2) of the Companies Ordinance that says, “The winding-up of a company by the court shall be deemed to commence at the time of the presentation of the petition for the winding-up.”

8.I am further aware of section 182 of the ordinance where it provides that, “In the winding-up by the court any disposition of the property of the company including things in action in any transfer of shares or alteration in the status of the member of the company made after the commencement of the winding-up shall, unless the court otherwise orders, be void.”

9.Mr Koo informs me that it is highly likely that the company will wind up and the divisions of the company will be in the hands of the liquidators who will under the Companies Ordinance maintain the status quo of the company pending a decree to wind up by the court.  In those circumstances, Mr Koo considers that the liquidator may hold a different view and it is in any event a decision that should be made by the liquidators.

10.I have taken into consideration that the company’s winding-up process has already commenced as soon as the creditors’ petition was filed, before a decree or the petition is heard by the court, and even though we do not have a section 181 situation here because there is no application for stay of proceedings and the matter has not yet gone up to the Court of Appeal, it would not make much sense if the company should be taken over by the liquidator who may have very different consideration for the company from the company’s present directors and it will not make much sense for the court to make a decision today on the application for leave.

11.It is in my discretion whether to grant leave in spite of the petition for winding-up, I consider it probably a futile exercise should I make a decision today.  For this reason, I shall adjourn the defendant’s leave application sine die with liberty to restore.

(Discussion re costs)

12.On the matter of costs, Miss Leung has asked for costs for today’s hearing and for the reserved costs on the last occasion.  I am not going to make any award on the costs of the application because that application has been adjourned, but as to the reserved costs on the last occasion, I have taken into my consideration the background disclosed to me today.

13.The background is that the defendant has been seeking a shareholders’ voluntary winding-up and that was the reason for the adjournment of the last hearing because there will be an impending meeting with the creditors on 31 August.

14.This voluntary winding-up intention was completely self-induced, and as Miss Leung said, the defendant knew the shareholders were going to propose a voluntary winding-up of the company.  In spite of that, an application for leave to appeal was made on 1 August and the date fixed for hearing on 24 August was purely to allow the defendant to face its creditors.  I had adjourned it in the hope, if possible, that the matter could be resolved between the creditors and the company; but, it was not to be.  On these basis, I consider the plaintiff should have its costs on the last occasion.

15.As to today’s hearing, it was not a straightforward legal issue because the defendant is seeking the indulgence of the court to adjourn for the company court to decide whether at a later date to wind up the defendant company.  And as I said in my ruling, it would be more convenient to see if a liquidator would be appointed if the company is wound up. 

16.That is not a scenario that this court has to, as of law, adjourn the application even though at the end of the day it would be more sensible to adjourn it today.  Therefore, in my consideration, the plaintiff has a right not to consent to this application by the defendant to adjourn and the plaintiff is entitled to ask for payment of some costs due to the inconveniences the defendant has put the plaintiff to.  I would therefore award costs to the plaintiff for today’s hearing to be taxed if not agreed, with certificate for counsel.

Miss Shannon Leung, instructed by Messrs Cheung & Choy, for the Plaintiff

Mr Ernest Koo, instructed by Shea & Co., for the Defendant